London virus restrictions .. oh, and the rest of the world

By Charlie Robertson, Global Chief EconomistRenaissance Capital

Some of us have woken up to headlines that London will see new virus restrictions announced today .. which fits with our theme that while the virus is not going to lead to re-impose to fresh economic restrictions in most of EM or Frontier – this is a potential threat in the EU and potentially east Asia. 

UK new weekly cases are now running at 26k – not much below the official peak of 34k in April – but in April many were not being tested. I think if the UK had been run by effective Italians or Germans instead of the incompetents [personal view] presently in charge, we’d have been recording 55k a week in UK.  So you can discount the weekly figures in the UK by nearly half.  Nonetheless, UK numbers are up ten-fold since pubs and restaurants were re-opened in the first week of July (and testing was OK then).  Germany and Italy are not so bad but still up noticeably since June/July.  French and Spanish data have also boomed – their data continues to be poorly reported by Johns Hopkins.

The main virus threat to most EM/Frontier economies from the virus is going to come from a hit to European demand via new restrictions – which might prompt renewed ECB easing and BoE too (November possibly).  But so far, Europe is keeping businesses and schools open. 

Source: Johns Hopkins

Denmark is looking much more problematic.  This was my template for European coronavirus success in 2Q20 – which I was contrasting with Sweden.  Denmark managed a short lockdown, few deaths and had kids back at school by April.  The numbers stayed good all summer.  Now Denmark has record high figures, and twice as many weekly cases as Sweden. 

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However, a lesson appears to have been learnt. Denmark is cutting public gatherings from 100 to 50, and bars and restaurants may need to close early (10pm to 6am shutdowns are proving popular – so maybe Danes will still be able to buy their early morning Tuborg).  This is a far cry from the 2Q shutdowns.  Mild restrictions that hamper leisure business (eg -10%) rather than lockdown which crushes it (eg -50% to -100%) looks more likely.

The good news for Denmark is treatment has improved since 1H20 and so deaths might well be lower for those experiencing the second wave. 


Meanwhile the “let the virus do its thing crowd” – from Brazil to Belarus are looking decent. A lot died to get to this point (neither president although both caught it)  … but again .. renewed lockdown is not a threat.  

South Korea is showing that east Asia is still able to manage the virus effectively even if Europe can’t. 

Source: Johns Hopkins

Among the major economies in Africa – only Morocco and Tunisia (yellow line) has a problem right now since case numbers collapsed in SA (grey) and Ethiopia (blue).

Source: Johns Hopkins

Others in periphery Europe experiencing a proper first wave having successfully suppressed it before include Georgia, which I mentioned last week.  Slovenia is at record highs.  Poland and Hungary hit over 1,000 cases a day recently, Czechia over 3,000 – all are seeing record highs.

Outside of Europe, the main negative trends are second waves in the UAE and Oman.  Kuwait and Iran are staying consistently high.  Jordan is having a first wave.  Saudi Arabia is down.

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India is recording roughly 100,000 cases a day – and will overtake the US for cases and deaths … in a 20% infection scenario we think India could lose 450,000 people to the virus .. which is roughly 5% of normal annual deaths. Harsh lockdowns have not worked in most low income countries so are very unlikely to come back in south Asia or SSA.  

Source: Johns Hopkins

While India is recording the most cases per day – its cases per 100,000 remain far below others like Brazil or South Africa.  The surprisingly low figures are for Bangladesh and Pakistan – we may need to see mortality data for the year to see whether this is just poor recording on the part of Bangladesh and Pakistan. 

Source: Johns Hopkins, IMF

Meanwhile US figures remain good in the big GDP states.

Source: Covid Tracking

CONCLUSION: Europe and Emerging Europe are the countries with a virus problem right now – and where lockdowns are a threat.  But so far most countries seem reluctant to take a massive hit to GDP by risking total shutdown.  The Swedish model seems the more likely course for most countries.  Nonetheless, renewed domestic demand weakness is a 4Q threat ot the EU and Frontier Europe.  We favour SSA and most of EM including the CIS, Latam, SA and south Asia – and east Asia for as long as their virus suppression keeps working this well. 

Odipo Riaga
Managing Editor at KachTech Media
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